How to Avoid Bad Equity Loans
Though home equity loans and lines of credit can help improve people’s finances, the bad ones can easily lead to foreclosure. The Federal Trade Commission has issued warning signal to householders–and specifically householders who are older and poor–in recent months. The market is swarming with mortgage loaners providing
equity loans and a few of these loaners are taking advantage of the misfortune.
A few loaners are giving loans to householders who don’t get decent income each month to
repay the debt. The loaners’ goal is to take possession of the home once the mortgager fails to repay
the debt, thus gaining equity for himself.
A few loaners are encouraging householders by providing them a equity loan. And some borrowers
have been taken for a ride as they failed to read the terms and conditions on such loan
carefully. The Balloon Repayment stipulated that the homeowner will repay only the interest toward
the mortgage and once the interest is paid then the householder will repay the principal on the
mortgage. Thus, the householder pays for the interest all to check he never paid a dime on the
mortgage itself, and once the refunds kick in for the principal, the householder is at chance of losing
his home if he doesn’t have the cash to repay the debt.
Some loaners will provide what is called “flipping” loans. If a householder is paying $150 each
month on his mortgage with low interest rates, and is provided and accepts the “flipping,” then he’s at
Chance of loss, since he accepted a loan that has higher interest rates, steeper fees and costs, and interest
on all the charges applied to the loan. If you’re comfortable with your current mortgage
arrangement, it’s wise to stay put when a loaner calls providing you (what appears) to be a good deal,
but is probably either a scam or high-interest loan in disguise.
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